Businessman Indicted on Loan Fraud Charges

Allison Tussey —  August 7, 2014 — Leave a comment

Chaka Fattah Jr., 31, Philadelphia, has been indicted and charged for his alleged role in a scheme to defraud banks and the Internal Revenue Service of hundreds of thousands of dollars.

The indictment charges that between 2005 and 2012, Fattah Jr.: made false statements to banks to obtain loans; made false statements to banks and the Small Business Administration to settle loans for less than what was owed; filed false federal income tax returns; failed to pay federal taxes; and stole from the Philadelphia School District, which had received federal funds for its operations.

The charges were announced by United States Attorney Zane David Memeger, FBI Special Agent in Charge Edward Hanko, and IRS Special Agent in Charge Akeia Connor.

According to the indictment, Fattah Jr. obtained numerous business lines of credit from banks through false and fraudulent statements to local banks and used the funds primarily for personal expenses—including car payments, gambling debts, restaurant and club expenses, utilities, clothing, electronics, retail purchases, charitable donations, jewelry, legal fees, and personal credit card expenses—rather than business expenses, as the loan terms required. The indictment alleges that these false statements involved fictitious earnings information that Fattah Jr. supplied for entrepreneurial companies which Fattah Jr. claimed he operated, including 259 Strategies, LLC (“259 Strategies”) and Chaka Fattah Jr. & Associates. Fattah Jr. claimed that 259 Strategies provided educational consulting, diversity consulting & audit services, technical assistance, and community relations, and organizational development services to a select group of clients. He claimed that Chaka Fattah Jr. & Associates performed research and consulting concerning the development of computer centers.

According to the indictment, Fattah Jr. received a loan from United Bank in 2011 for $50,000 intended for “working capital to support business operations.” Instead, it is alleged that he used the funds to make car payments, to pay down over $15,000 in personal credit card debt, and to pay in excess of $33,000 in gambling debts at area casinos. The charges total approximately $206,000 in bank loans received through false misrepresentations or fraud.

The indictment also alleges that Fattah Jr. defaulted on several lines of credit and provided false information to two banks, to the United States Small Business Administration, which had insured the bank loans, and to a Small Business Administration investigator, to attempt to settle the debts for less than what was owed. The indictment charges that Fattah Jr. falsely claimed that 259 Strategies was out of business at the time he was attempting to settle his debts in 2010, and that he was earning only $2,500 per month. The indictment charges that, in fact, during 2010, Fattah Jr.’s 259 Strategies was intact and, through this company, he was earning between $6,250 per month and approximately $37,500 per month.

Fattah Jr. is also charged with theft from a program receiving federal funds, that is, stealing funds supplied by the federal government to the Philadelphia School District. The indictment alleges that, at times, Fattah Jr. was the Chief Operating Officer of a Philadelphia company which provided educational services to “at risk” and other students through contracts with the school district. The indictment charges that Fattah Jr. provided false expense information and inflated salary figures for teachers and administrative staff on budgets submitted to the school district, which made payments consistent with the budgets provided. Thus, the charges allege, Fattah Jr. concealed the theft of the funds from the school district.

Finally, the indictment charges that Fattah Jr. filed false federal income tax returns for tax years 2005, 2006, 2008, 2009, and failed to timely pay federal income tax of approximately $51,141 on reported income in excess of $150,000 during 2010.

If convicted of all charges, Fattah Jr. faces a substantial term of imprisonment, restitution to the IRS, a fine of up to $13,000,025, a special assessment of $2,300, and up to five years of supervised release.

The case was investigated by the FBI, IRS Criminal Investigation, and the U.S. Department of Education, with the cooperation of the Philadelphia School District’s Office of Inspector General. It is being prosecuted by Assistant United States Attorney Paul L. Gray.

Allison Tussey

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